Carlo Ancelotti is on the verge of returning to football at Paris St-Germain. The Ligue 1 leaders are expected to confirm on Thursday that he has signed a two-and-a-half-year contract which will establish him as the highest paid manager in the French league.

Ancelotti, who will replace Antoine Kombouaré, spent Tuesday night in Paris before arriving at Parc des Princes on Wednesday afternoon alongside the French club's sporting director, Leonardo. The former Chelsea manager, who was sacked at Stamford Bridge last May despite winning a league and cup Double in his first season in the Premier League and finishing as league runners‑up in his second, will earn a net annual salary of around €6m (£5m).

The Italian won two Champions League titles during a successful eight‑year spell in charge of Milan but, having initially been placed on gardening leave after leaving his position at Chelsea, he has now reached agreement over compensation for the final year of his contract in London and is free to join another club. Ancelotti's instinct had been to remain in England, preferably in the capital, though PSG, backed as they are by Qatar Sports Investments (QSI), represent a tantalising and ambitious alternative.

The French club still hope to secure the free transfer signing of David Beckham once his contract at Los Angeles Galaxy expires at the end of the month and they could confirm the arrival of the former England captain while he is on a five-day mid-season training break in Qatar and Dubai next week. Ancelotti worked with Beckham briefly at Milan during the midfielder's first loan spell at San Siroand will seek to be reunited with a number of his former players in the mid-winter transfer window as he adds to PSG's options.

Interest has already been expressed in Milan's Alexandre Pato, a player pursued by Chelsea during Ancelotti's time in London and costing around €50m, and there remains the chance that QSI could sanction a move for Real Madrid's Kaká. Florent Malouda is another who could move to PSG – who were eliminated from the Europa League under Kombouaré but are three points clear at the top of their division – after expressing frustration at his bit-part role at Stamford Bridge.

Ancelotti, who is likely to be unveiled on Friday or Saturday, will be joined in France by Giorgio Ciaschini and Giovanni Mauriin his backroom staff, both of whom worked with him at Chelsea, along with the former France international Sabri Lamouchi. Meanwhile PSG are formalising the details of Kombouaré's departure. The new manager's first game in charge will be a French Cup match against the amateur club Locminé Saint-Colomban who play in CFA2, the equivalent of the French fifth division, on 8 January.